Too Few Ships Drives Bid Prices for Cargo

Wednesday, October 24, 2007
The world's fleets of cargo ships are aging, and demand for commodities is surging. That means the cost of shipping will go up, pushing up prices and crimping supply. The top performing ETF year to date is Market Vectors Steel SLX, which has returned 72.65%. Other ETFs with big gains were iShares Dow Jones (NYSE:DJ) U.S. Oil Equipment IEZ, iShares S&P Global Materials Sector Index Fund, MXI and WisdomTree Basic Materials DBN. The iShares ETFs returned 41.60% and WisdomTree Basic Materials returned 38.43% year to date. The price of oil was a big factor for the iShares ETF, and that price in part reflects the cost of transport, just as with many other commodities. Shipping costs are measured by the Baltic Exchange Dry Index, an indicator of prices for transporting freight. That index has risen 145% year to date and 171% over the past 12 months. Lag time between decommissioning old ships and building new ones also drives costs. It can take three years to build a large cargo vessel. Many are just being started now. Commodity prices tend to rise with the index because they have to be physically moved. ETFs that track commodities themselves will therefore rise with it. Stocks of commodity producers will also rise. But those companies that produce processed commodities such as steel might be under pressure as the cost of raw materials goes up. Dan Chamby, portfolio manager at BlackRock who manages the Global Allocation Fund, says investors should think about the components of commodity ETFs. He also notes that stocks of shipbuilders and oil rigs also do well when commodities face upward price pressure. So when looking at commodity ETFs it pays to think about whether such companies are in them. Market Vectors Steel has ArcelorMittal MT as its second-biggest piece, and the ADR has gained nearly 80% for the year. As a steel producer, one might think it would be sensitive to increases in iron prices. But Bob Shearer, another BlackRock portfolio manager, notes that the global economy has been able to absorb the increased prices without demand falling off -- even with gold and oil reaching new highs. [Source: Investor's Business Daily]
Maritime Reporter September 2013 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

NZ's Lyttelton Port Recommends Offer, to Pay Special Dividend

The board of New Zealand's  Lyttelton Port Co. Ltd recommended minority shareholders accept an offer of NZ$3.95 a share offer from the commercial arm of the Christchurch city council.

A Boost for UK Offshore Drilling? DW Monday Muses

Drilling activity offshore UK is now expected to increase over the next few years as government and industry reacts to the recommendations in Sir Ian Wood’s report

MHI, IHI & DBJ Join Forces On Investments

Mitsubishi Heavy Industries, Ltd. (MHI), IHI Corporation and the Development Bank of Japan Inc. (DBJ) concluded a three-way formal agreement today on their respective

Coast Guard

USCG Medevacs Mariner in Port Alexander, Alaska

The Coast Guard medevaced an 87-year-old female reportedly suffering from complications associated with a lower back injury aboard the fishing vessel Annie B in Port Alexander, Sunday evening.

USCG Responds to Plane Crash 51 mi SE Of Chincoteague Island, VA

The Coast Guard is responding to a plane crash Saturday approximately 51 miles southeast of Chincoteague Island.   Watchstanders at the Coast Guard 5th District

USCG Repatriates 86 Migrants

Coast Guard crews aboard the Coast Guard Cutter Charles David Jr. and the Coast Guard Cutter Valiant repatriated 86 migrants illegally migrating from Cuba and Haiti.

 
 
Maritime Contracts Maritime Standards Naval Architecture Offshore Oil Port Authority Salvage Ship Repair Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2544 sec (4 req/sec)